Volkswagen has emerged as one of the biggest automobile manufacturers globally. The main objective of the company is to maximize its market share. This is the rationale behind investment in India which is a critical component of the strategy. It is evidenced by the 3.6% market share recorded by the company since setting up operations in India by presenting its brands Skoda, Audi, and VW. VW India is a good example of quality market segmentation and insightful knowledge of various consumers. The careful understanding of its target consumer groups means the company has been able to utilize different platforms such as social media to reach its consumer audience. This paper provides a detailed market segmentation analysis by examining the segmentation used by VW India, its benefits and challenges, and the function of data in definition of market segments. In addition, it discusses the essence of target marketing identification, the implication of VW India segmentation on market mix and the benefits and challenges of expanding market segmentation after successful business in existing market segments.
Discussion of Market Segmentation
Market segmentation has been evidenced as a critical component in modern marketing. It is defined as the process in which the market is divided into different groups or segments using various attributes such as behavioral, geographical, demographic and psychological factors (Gillian, 2011). In the segmentation process, the company examines the types of customers targeted and methods used. The application of market segmentation considers the target consumers and their response to specific marketing objectives. The application process is based on different variables which include geographic, behavioral, demographic, and psychographic attributes. One of the importance of market segmentation is that it enables businesses to focus on the behavior and purchasing patterns of their customers. When applied effectively, the company can attain an enhanced return on investment (ROI).
VW India is a constituent of the Volkswagen EG which has its presence globally in varying brands such as Audi, Bentley, Porsche, Bugatti, SEAT, and SKODA among others (Gangurde et al., 2016). The company sought to expand its undertaking in India. Since India is considered one of fastest developing automobile market, VW saw a potential market for its products. VW India started its investment with the objective of targeting the working populate and seeking to turn brand awareness into brand loyalty. VW India appropriately utilized its market segmentation to increase its market share. It entered the country in 2001 with Skoda and later with Audi and VW models in 2004 and 2007 respectively (Gupta, 2013). The market segmentation majorly involved these three brands and targeted different consumers. Skoda and VW brand were meant for premium segment since Indian populate had perceived the European mindset of premium products. The positioning of Skoda was less premium compared to VW which was more premium in comparison to Honda and Toyota. Audi, on the other hand, was in luxury market segment at similar to brand such as BMW and Mercedes (Gupta, 2013). This market segmentation was essential in capturing a 3.6% market share thereby increasing its customer base. VW India while using market segmentation was able to define and understand its target audience.
Benefits and Limitations to Market Segmentation
Market segmentation has worked to aid companies to define and understand their target audiences to enable more precise communication of the targeted messaging. It brings a myriad of benefits to organizations such as enhancing campaign performance, unveils areas of expansion, enhances business focus, and informs the process of product development among others. Additionally, it supports other critical business decisions concerning how to get products to the target consumers. Despite the inherent benefits of market segmentation, its applications pose some challenges to organizations. For instance, there is possible disregard of potential consumer audience since the company leaves out some segments. Also, individuality is overlooked since consumer segmentation classifies customers into buying-behaviors which cannot capture the unique behaviors of specific people. Lastly, there is possibility that the wrong message is perceived by the target audience leading to loss of market.
After examining the benefits and limitations of market segmentation, it is critical to evaluate the risks of its application by VW India. It is essential to reiterate that VW accessed the Indian market with Skoda and later introduced Audi and Volkswagen. These three brands were position for different market segments. Skoda was the less premium of the three brands with VW being more premium compared to Honda and Toyota and Audi competing with BMW Mercedes in the luxury segment (Gupta, 2013). Risk of market segmentation to VW India is that Skoda was perceived as a more up-market brand compared to VW. This was because Skoda has a history in India and it was perceived as a premium brand.
Function of Data in Segmentation
Market research is the process by which a business collects and gathers information concerning the target market. The main objective is the provision of comprehensive perspective of the consumers to enable development of products that satisfy their needs. There are different market research techniques and they include primary market research and secondary market research which provide primary and secondary data respectively. Primary research entails collection of first-hand data which helps in provision of information concerning products, markets, and consumers. Methods used in collecting primary data include observation, questionnaires, surveys and experimentation (Al-Shatanawi et al., 2014). Secondary research entails synthesis and analysis of existing marketing data. The role of data is critical in definition of target segments, promotion of their performance, and enabling market decisions. Data helps organizations identify market opportunities and promotes effective investments in different market segments. It helps understand the best way to communicate with consumers thereby expanding markets. These data provide insights on the nature, likes, and personalities of the target audience. It aids in reduction of market risks since products are tailored to suit a specific market segment. It also helps in establishing possible concerns since research identifies preferences, reactions, and choices of consumers.
VW India case study provides a prime example of a company using data to inform its market segmentation process. For instance, the company used customer interviews to establish their buying motives and attitudes. It is indicated that the company engages 200 consumers annually in freewheeling chats (Gupta, 2013). Market data indicated that consumers buy cars for three motives namely signaling they were successful, for utility, and for personal space. Using this information VW India positioned itself as an aspirational brand and this accomplished by introduction of higher-end brands such as Passat and Jetta (Gupta, 2013). Market research data was used to design products that were appropriate for the Indian market.
Importance of Target Market Segmentation
A target market can be described as a group of consumers within the available market at which the organization seeks to communicate its marketing message. Identification of target markets aids in the development of effective market communication. In the Indian market, VW used different segments which were according to social, statues and value orientation. Target market identification helped VW India emphasize on five segments. These included new middle class, new entrepreneurs, and modern urban elites, metropolitan smart and young progressives (Gupta, 2013). Target market identification has some inherent advantages. For instance, the company can focus its market efforts effectively. The process of identifying target markets is essential as it helps in development of the appropriate message to be communicated to the target audience. It also helps with focusing on the potential audience and the right audience. For instance VW India focused on different target market segments which included modern, high-tech, educated and individualistic which had specific profiles and buying preferences. All these target markets were critical in the realization of company goals which included improved of market share in India and satisfy consumer needs (Gupta, 2013).
Impact of VW India Segmentation on Marketing Mix
Market segmentation is the division of a target market into segment according to varying attributes. It is therefore essential to examine its impacts on marketing mix which entail product, price, promotion, and place. It is an important tool to help gain insight into the specific product to be offer to consumers and how to ensure it is a success. Price is the value the product value and is determined by target segment, cost of production, and ability to supply among others. Market segmentation of VW India had its effects on price. Initially the company entered three brands in different segments which meant different perceived quality and therefore different prices. In luxury market, they had Audi, and Skoda and Volkswagen in premium segment (Gupta, 2013). This meant that these were targeted consumer segments and hence differentiated prices. Product was impacted by market segmentation. Essentially, VW India focused on various consumer targets and these include modern, educated, individualistic and high-tech. Due to the varied needs of all the segments, products were designed to meet specific needs of the different consumer segments. Place and promotion were not affected by market segmentation. For instance, VW India used Mudra group for its product promotion for all its products (Gupta, 2013). The message that was communicated in promotion was that of innovativeness, value, and responsibility. This was key in appealing the target consumers and developed long-term sense of quality and reliability.
Benefits and Risks of Market Expansion through New Market Segments
VW India used market segmentation while entering the Indian market. For example, the company used psychographic segmentation to access the target market. This was based on perceived luxury by the consumers and that is why the company introduced premium and luxury segments. In the luxury market, VW India had Audi and in premium segment, there was Skoda and Volkswagen. The company also employed demographic segmentation which considered factors such age and occupation among others. There were different segments which include traditional merchants, new middle class, young progressives, traditional young aspirers, and supreme corporate India (Gupta, 2013). Traditional merchants were those in small and medium family business and they preferred hatchback and saloons. The traditional young aspirers preferred vehicles below Rs. 4 lakhs and new middle class preferred vehicles above Rs. 5 lakhs (Gupta, 2013). This means that demographic segmentation was essential in helping VW target its consumers. The use of market segmentation helped the company reach its consumers and adequately plan for market entry.
In market segmentation, a market research agency was contracted. The agency determined nine segments which were according to too social status or value orientation and this result to use of five segments. A criterion was essential in establishing the market segment with the highest potential. These included homogeneity among similar needs, distinction that makes the segment different from others and presence of a common reaction in the specific segment.
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